All Forum Posts by: Zach Davis

I don't have experience with that particular tub surround but for the most part, they are junk, especially anything you'll find at Home Depot or Lowes. The only ones I would ever recommend installing are what is called a three piece or knockdown tub. They are similar to a 1 piece tub/surround but can be unbolted to get through doorways in existing construction. You then silicone them, bolt them back together, essentially turning them back into a one piece.

What I typically do is this; Its fairly cheap to have your tub refinished if it needs it, or you can install an American Standard Americast, which is a good reinforced steel tub and is relatively cheap. I recommend this tub as a plumber as well as putting them in my rentals. I would tile the walls, just don't forget the waterproofing. I can't tell you how many I've had to repair dry rot in because there was no vapor barrier. Install Tyvek or roofing felt, then hardie backer, then tape and mud the seams and corners, mud the screw holes, and roll on a waterproofing sealant, like RedGard. Then tile, grout and seal. The finish product will last a very long time, be water tight, and look far better than a fiberglass or acrylic surround.

Dave's philosophy is a good one for personal finance but its too black and white for me. When it comes to business, I prefer Kiyosaki's philosophy, he differentiates between debt that makes you money and debt that costs you money. For me, debt is a tool, but its a sharp one that can injure you if you take too many chances with it. I personally, like the idea of reducing risk down the road, which for me, means selling some properties to pay the others off and living debt free into my retirement years.

 Originally posted by @Adam Bartomeo:

@Zach Davis

Your funny with the bleating.

Despite the early posts in this thread I have heard your a lot of MF investors from all over the country express your concern.

I am surprised to hear that you go back into flipping. Do you feel like your going backwards?

Backwards? No, not really, I typically rehab everything I keep anyway. Also, for me it either makes financial sense or it doesn't. I look at flipping and buy and hold as two parts of the same game, flipping might be considered offense and buy and hold could be considered defense. Just like any sport, you need both at different times, depending on the market. 

Actually, in the current market it might make more sense to be flipping small multi since, as you said, there are a lot of sheep out there right now. Only one of my rehabs has been an actual flip, but it didn't start out that way, and I did it over the space of 10 months so I don't know if I would even call it that. I rehabbed in stages just like I always do; I bought the property, evicted the first tenant, rehabbed that side, moved someone in, evicted the second tenant, rehabbed the other side, moved someone in, and rehabbed the outside. Only with this one, I decided about half way through the second unit that it wasn't something I wanted to keep so I changed game plans, finished it, and sold for a decent return.

Also, I wouldn't really call anything in my previous post a concern. The market is cyclical, good bad, or ugly, there's usually a way to make money in it, you just have to be able to adapt.

I definitely hear some bleating in my market. I invest in small multi and have been having trouble finding deals in the last 6 months. A simple duplex will sell for 280 - 300k when the rents really only support a 200 - 225k sales price. And the fervor appears to be first time "investors". People seem to think that if their mortgage is $1500 per month and their rents are $2000 then they just made $500. Apparently they've never heard of CapX, maintenance, taxes, vacancy, or utilities...

This is how I look at it though; Short term, the properties I currently have will appraise for much more than I have into them, which gives me more financing options for expansion. Long term, 2 of the properties I own were bought at a discount during the downturn from people that did the exact same thing in 2006. They paid way more than the properties' income could justify and hemorrhaged money for years before pulling the plug in a down market. The result? I bought them below market because they got frustrated and emotional after failing to do the correct math years before.

The new investor fervor has also forced me to change my investing strategy. When the deals began to dry up I moved into private money and rehabbing, specifically the 4R strategy, Rehab, Rent, Refinance, Repeat. The deals are fewer but the money is better and I usually don't have much of my own money invested after the refi, especially the way property values are rising. ;-)

I use an accountant that specializes in income producing real estate and owned some himself so he has skin in the game. We're still small enough that I could probably suffer through doing it myself, but why? It's not that expensive in the grand scheme of things and he saves me money on my tax bill. I also call him and get tutorials on my accounting practices so that's a nice freebie.

My wife and I have done it a few times and we're getting ready to jump into another few now. We take on distressed properties, do a lot of rehab work, and deal with some less than savory tenants when we take them over, but they turnaround soon enough and it works out fine. We have a wireless alarm system we take with us from place to place but we've yet to need it. Once the properties are repositioned we've had good quiet tenants that pay on time. The main thing is screening, closely followed by not becoming friends. I'm not saying you can't be friendly, just don't involve them in your life and don't get involved in theirs. When that happens they will inevitably expect more leeway or special treatment because you're "friends", even if on a subconscious level. You and they need to know that you're relationship is business. The first property I bought was essentially being sold because the owner didn't screen. She got a criminal in there and lost a ton of money because it became a crime scene. Then it got lost in the police files and wasn't released for several months, and after that was expensive clean up. The last one was an owner that was too close to his tenants and was loosing money because he kept letting them pay late, as in months... several... He also felt bad raising rents on them even though he was $200 under market per unit and loosing money. He basically liked them too much for his business to succeed. The biggest thing I tell anyone who will listen is that you have to treat it like a business. As long as you do that, you'll likely be fine.

As a plumber I can tell you that it is likely a simple fix. I see dozens of these a month. That said, it could also be something like cracked fiberglass or bad caulking so make sure its not something simple like that before tackling the actual plumbing. 

Obviously I can't tell you definitively without seeing it but If there is only water leaking when the tub is running and at no other time you are likely looking at bad putty or rubber on the drain shoe, possibly a leak in the trap or drain, or it could be a bad pipe going to the tub spout or shower riser.  Unfortunately, the current owner probably won't fix it correctly otherwise it wouldn't still be happening. It would appear that he has gotten into it before, evidenced by the prior drywall repair. Typically 2nd floor tubs don't cause a ton of mold or rot damage because even if there are significant levels of moisture the drywall will allow the water to leak through and eventually cave in rather than holding it in. Insulation can hold a ton of water but even then it gets heavy and will quickly saturate the drywall, which would be fairly obvious. I'm not saying its not possible to have structural damage, just that its not as likely as you might think since you walk underneath the tub every day and can see the signs of a leak before it gets out of control.

  Have someone open up the ceiling, diagnose the problem and repair it. Unless its an abnormal problem or has been happening since the building was new and has caused a lot of damage, I doubt it will cost you more than $500. Not a big deal in the grand scheme of things... 

It typically costs me around $250 to paint, clean, shampoo carpets, and do minor repairs, that's usually after a tenant has been there 2-3 years. I've had some that cost me nothing at all, and others have been a full rehab that cost 5-6k. Completely depends on the tenants and property. You'll be double that if you're paying for labor.

They can, especially if you are willing to take on properties that others are not. I will be closing on a 6 unit in a few weeks that has been listed off and on for 4 years. The problem is the rents are severely under market, the property has a meth lab in one unit, trashy tenants in the other 5, and the listing Realtor is a buffoon. In addition, the property taxes are extremely high and all said and done the numbers don't make sense. Because of those problems, it has had only one offer in the last 4 years, which fell apart because of the high taxes. I came across it and contacted the dept of assessment and taxation who informed me, after having them dig into the legal coding, that the taxes were way higher than they should have been because of sewer assessments, but they didn't know what that meant... After calling the sewer company and bouncing from supervisor to supervisor I was told, in the most uninformative and general terms, that since the property is in a grey area where another utility supplies the water, they have no recourse, like tuning off the water, when the sewer bill doesn't get paid. And that this sewer bill "may of may not have been paid in a long time... like years." So that bill and fees are applied to the tax bill. The assessment is considered additional taxes and are indistinguishable from the rest of the tax bill unless you dig into it further. Apparently, since the utility provider is part of city government they can handle it that way instead of placing a lien on the property. At any rate, the taxes went from over 18k to under 7k, a total savings of almost $9000 per year... AND now that the title company knows, she has to pay off the back sewer bills on closing as well as the property taxes. All said, after the first year of rehab and re-positioning, I will be looking at around 80k in equity above my down payment, and about 22% cash flow based on my initial investment...

You can experiment with owner finance, wrap arounds, or private money. Any combination can be used to bend the rules but ultimately you will end up with a standard commercial or portfolio loan if you want more growth.